Time and billing will not be killed in the revolution

Earl W. Morrow CPA PC, a Roswell, Ga.-based CPA firm, has been using an automated time and billing system for decades without any major complaints."We have been using an automated system since the first time we opened our doors, some 24 years ago," said Patti Morrow, administrator at the firm. "It has done, for the most part, what I wanted it to do."

Time and billing systems have been around for decades, and most firms have been using an automated system to do their hourly billing for years, with no big woes.

The reason there are no key issues on hand is because most of these software systems are keeping pace with demand for features such as applications for personal digital assistants, the ability to integrate calendar items from Microsoft Outlook, and utilizing .Net technology. But a change in time and billing methodology may change not only the way CPAs use these software systems, but also the way CPAs bill their clients.

Features that make CPAs smile

Until the revolution happens - if it happens - CPAs are happy to see features like Outlook integration become a staple. "I'm a CPA and practiced for 25 years. CPAs are tired of their data being in 17 different places. That's why there is a trend now towards tighter integration," said Fred Lindsley, CPA and president of ImagineTime Inc., makers of the time and billing system ImagineTime. "It's a real time-saving tool."

Most time and billing systems now, including ImagineTime, Timeslips by Sage, and BillQuick, all offer some form of Outlook integration. With this integration a CPA can export, with a click of a button, a calendar item like a meeting with a client from their Outlook to their time and billing system, so no double-entry is needed.

While most popular time and billing systems are neck and neck in terms of integration with Microsoft Office products and features like report customizations and data mining tools, CPA firms would still like to add a couple features.

Morrow, who uses Timeslips by Sage, would like to receive payment for services via PayPal and send invoices to the firm's clients via e-mails. Felecia Dixson, partner at Rolla, Mo.-based CPA firm Alfermann, Gray & Co. LLC, wishes there could be more integration between her BillQuick system and her Creative Solutions tax applications. And in an effort to never waste a billable hour, Julian Wilner, CPA and owner of Manalapan, N.J.-based CPA firm J. Wilner & Associates, wants to see his ImagineTime software tied directly in with his phone lines.

"We always have our time and billing system running in the background," said Wilner. "When someone calls, we can log the time and when you finish the call, you click 'finish' within the system. This way, a month later, you can find out, for example, how many times this tax client has called. And sometimes you see you spent more time on the phone than on the tax return."

The revolution

However, a new methodology has been taking shape with the help of advocates like Ron Baker, CPA and founder of the VeraSage Institute, a pricing model think tank in Petaluma, Calif., and Daniel Morris, CPA, co-founder of the VeraSage Institute and a partner at Morris + D'Angelo, a 16-person CPA firm in San Jose, Calif.

Value-based billing is not a new concept, but it is one that could revolutionize not only the development of time and billing software, but the way that CPA firms operate on a daily basis as well. "It's not so much the systems that aren't good, it's the theory behind them," said Baker. "Pricing by the hour, time sheets and billable hours - we need to bury them. No customer alive buys time, they buy capital and results. With our profession, it's become so ingrained in our DNA that it has become a huge challenge to change the way we think."

Baker argues that the system is corrupt. In his view, a CPA firm cannot charge for time spent on a task because no client is concerned with how much time their CPA spends on their tasks, just as long as the end result is solid.

Some CPAs, however, disagree with Baker.

"We are certainly not moving towards that model [value-based billing]. We would have really heavy negative feedback from clients. We could do that if we want to run people off," said firm administrator Morrow.

CPAs like Dan Morris, however, are big supporters of Baker's system. Morris started looking into a more flat-rate pricing model about six years ago, when he convinced his entire firm to quit using time sheets, and helped Baker start the VeraSage Institute.

"No, we didn't go bankrupt. No, customers never even asked to see a time sheet. If you come up to us, we give you a price," said Morris. "I got tired of that terrible excuse for inefficiency that allowed people to expand the scope more than what was necessary. The scariest part for CPAs is partners that say they won't know what their people are doing if they don't have a time sheet. But a time sheet doesn't exist for that. It exists to record efforts - that's what it exists for. The smart and innovative person is punished for not charging extra time, and it rewards the sloth."

Baker claims that the new pricing model is being adopted by many accountants in the English-speaking world. He estimates that out of the 90,000 English-speaking firms, about 48,000 are in America, (the American Institute of CPAs says 45,000), and about 7 to 10 percent are using fixed pricing up front, up from none just four decades ago. "We don't have a Top 100 firm yet, but there is movement."

Alfermann, Gray & Co. LLC is also on board with this fixed-pricing model; however, they are still using a time and billing system to keep track of hours spent with certain projects to benchmark the costs.

"We keep track of hours, but the only hourly billing is if we go to court for our forensic work, because you really don't know how long you are going to be there. You can't judge that," said Dixson. "We track hours put into a project so in six months we re-evaluate what we have charged. Without that you have no way of knowing or benchmarking. We have to be able to look back and see if we're losing [money]."

While some CPA firms may not find the value in value pricing, some time and billing software developers are noting the trend and agreeing with the movement.

"They will call it a revolution, and it's completely valid. Today you are dealing with automated tasks by technology; if you go by the old billing rate per hour, you'll run yourself out of business," said Mike Savory, senior product manager for Timeslips by Sage. "We have a rate rule tool in our product; you can set in rate rules and apply it to specific rates depending on who you are working with. Value-based pricing is being talked about more and more in the CPA industry, and we will evolve all of our products to accommodate that trend."

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